Sentenced to life imprisonment the founder of Evergrande, symbol of the Chinese real estate boom
Xu Jiayin became the richest man in China
BarcelonaThe founder and former president of the Chinese real estate giant Evergrande, Xu Jiayin, was sentenced this Thursday to life imprisonment by a Shenzhen court for financial fraud. The sentence, handed down in the first instance, also establishes the confiscation of all his assets and the deprivation of political rights for life. The conviction culminates the fall of one of China's most powerful businessmen. Xu became the richest man in the country in 2017, when Forbes estimated his fortune at 42.5 billion dollars.
The court considers it proven that between 2016 and 2021 Evergrande and its executives falsified the company's accounts continuously and on a large scale, artificially inflating assets and concealing liabilities. Specifically, the subsidiary Evergrande Real Estate inflated revenues by approximately 72 billion euros between 2019 and 2020, partly by recognizing sales of unfinished homes in advance. The sentence also attributes to the group crimes of illegal absorption of public deposits, fraudulent fund-raising, fraudulent issuance of securities, and irregular disclosure of financial information, as well as practices related to bribery and embezzlement.
Evergrande Group will now have to pay a fine of 8.82 billion yuan – about 1.06 billion euros – and its main real estate subsidiary, Evergrande Real Estate, will have to pay 7 billion yuan – about 840 million euros –.
Xu, known internationally as Hui Ka-yan, has been under house arrest since 2023 and in April pleaded guilty to the charges against him. In the same proceedings, the court has also sentenced five former Evergrande executives to prison terms ranging from six to eighteen years. In total, the Chinese justice system has issued 56 sentences related to the case.
Rise and fall of the Chinese giant
Evergrande became one of China's major real estate developers thanks to an expansion based on heavy debt, until in 2020 Beijing began to limit financing for companies in the sector with the so-called three red lines. The measure established strict limits on three financial indicators: the debt-to-asset ratio, the debt-to-equity ratio, and the cash-to-short-term debt ratio.
Evergrande's crisis became evident in 2021, when the company began to have problems meeting its payments and ended up defaulting. The group had accumulated more than 300 billion dollars in liabilities and became the most visible face of the Chinese real estate crisis. In January 2024, a Hong Kong court ordered its liquidation at the request of foreign creditors, in a particularly complex process because the majority of its assets were located in mainland China.